click on the graphic or click here to open the interactive graphic in a new window…(you might have to refresh it once after its open to activate it)

im not so sure i agree with the relative magnitude of all their risk assessments and the interconnectivity of them, but i gotta assume these guys have done their homework…the graphic is interesting in that it gives you the costs, likelihood and connection strengths of various interconnected scenarios – and the ability to explore areas in one of the five assigned “domains”…click on it, play with it, & see what you think might be missing…

Saturday, March 27, 2010

the review of the week ending Mar 27th has been completed & posted on the globalglassonion blog...it briefly summarizes and links to articles from MSM and the blogosphere, generally on the topics listed below and whatever else, including about 4 dozen links to analysis and post mortems on the health care reform passed last week...

Tuesday, March 23, 2010

not being a climate scientist, i cant tell if greenhouse gases are causing “global warming” or not, although evidence points in that direction…and being in the lake erie snow belt, where we have five months of winter, i really dont care if it warms a little…if lower manhattan floods, let them figure it out, no great loss to humanity…but recent stories indicating rapidly rising levels of greenhouse gases seem like they should be a cause for concern…lets review what we know…

The recent history of atmospheric carbon dioxide

Charles Keeling began precise monthly measurements of the concentration of carbon dioxide in 1958. He was the first to do so systematically and so his data have come to be known as the "The Keeling Curve." Learn more about Charles Keeling at http://scrippsco2.ucsd.edu/home/index.php �The measurements were made at the Mauna Loa Astronomical Observatory which is at the summit of an inactive volcano in Hawaii. Mauna Loa was chosen because it is far from major sources or sinks of carbon dioxide. Carbon dioxide concentrations measured at Mauna Loa are a good proxy for the average of the whole Earth.

The black wiggles are a continuous record of the concentration of carbon dioxide in the Earth's atmosphere from 1958 to May 2007. NOAA (National Oceanic & Atmospheric Administration, which is a branch of the U.S. Department of Commerce) is the original source of the data which may be found at http://www.esrl.noaa.gov/gmd/ccgg/trends/ This is data collected by competent scientists and it is not controversial.

The black wiggles record the breathing of all the plants and animals on Earth. Plants must inhale carbon dioxide to grow and as they do so, they remove carbon dioxide from the atmosphere. There are more plants growing in the Northern Hemisphere because there is more land mass in the Northern Hemisphere, as a glance at a globe will confirm. When all the plants in the Northern Hemisphere are growing during the summer, they remove significant amounts of carbon dioxide. The maximums occurs every year in May, at the beginning of the growing season. The minimums occurs every year in November, at the end of the growing season. All of this is quite visible on the graph.

If the general trend continues, the concentration of carbon dioxide will be 400 PPM within ten years. It is hard to avoid this conclusion. Nothing short of a large volcanic eruption or a nuclear war or a large meteorite strike would change this conclusion.

now, lets compare the above levels to some historical data:

Atmospheric carbon dioxide during the last four ice ages.

This graph puts it all together. It is a record of the concentration of carbon dioxide during the past four ice ages. The green part is from: http://www.ncdc.noaa.gov/paleo/icecore/antarctica/vostok/vostok_co2.html The data comes from air bubbles trapped in ice taken from a two kilometer hole drilled into the Antarctic ice sheet. It is like the preceding Keeling curve except that it extends 415,000 years back in time instead of 50 years. The Keeling curve has been added to the right side as indicated by the black and red. The horizontal scale prevents showing any detail.

At 400 PPM, the amount of carbon dioxide currently in the atmosphere is unprecedented, at least in the past 415,000 years. The last time it reached even 300 PPM was 325,000 years ago.

so, since that report was prepared 3 years ago, where do we stand today? an article from reuters brings us up to date: CO2 at new highs despite economic slowdown - Levels of the main greenhouse gas in the atmosphere have risen to new highs in 2010 despite an economic slowdown in many nations that braked industrial output, data showed on Monday. Carbon dioxide, measured at Norway's Zeppelin station on the Arctic Svalbard archipelago, rose to a median 393.71 parts per million of the atmosphere in the first two weeks of March from 393.17 in the same period of 2009, extending years of gains"

ok, CO2 is now at levels never seen in history, and we seem to be surviving…but a few weeks back, another story broke, indicating that atmospheric methane is starting to get out of hand too…

Methane levels may see 'runaway' rise, scientists warn - Atmospheric levels of methane, the greenhouse gas which is much more powerful than carbon dioxide, have risen significantly for the last three years running, scientists will disclose today – leading to fears that a major global-warming "feedback" is beginning to kick in. For some time there has been concern that the vast amounts of methane, or "natural gas", locked up in the frozen tundra of the Arctic could be released as the permafrost is melted by global warming. This would give a huge further impetus to climate change, an effect sometimes referred to as "the methane time bomb". This is because methane (CH4) is even more effective at retaining the Sun's heat in the atmosphere than CO2, the main focus of international climate concern for the last two decades. Over a relatively short period, such as 20 years, CH4 has a global warming potential more than 60 times as powerful as CO2, although it decays more quickly.

and it also appears that the aforementioned “feedback loop” is already feeding back:

so, the atmosphere is growing increasingly strange, & it appears we may already have a runaway situation with these gases…as i dont see a solution at hand, this report is just FYI…but just in case they’re right about these gases causing an abrupt warming, dont be buying any florida real estate…

Sunday, March 21, 2010

what happened to consumer protection in the senate this month was previously documented on this blog, so we’re picking it up from there…as advertized, last monday dodd introduced an all new financial reform bill, replacing the corrupted compromise worked out earlier this month…for those who believe something meaningful will survive the lobbying & who want to take this seriously, here is the text of the proposed bill…its only 1,336 pages long…if you’re interested in a shorter summary, from the WSJ: Factsheet: Senate Financial-Regulation Bill (as provided by dodd’s committee)

Financial Regulation -- not as ugly as it looks - At first glance, it is tougher and better than I had expected. Readers beware: it’s not a pretty piece of work. Kids! Do not read this at home. It makes the prospectus for a subprime mortgage-backed security look like a model of clarity. The bill is full of murky exclusions, exceptions and hair-splitting -- usually a red flag that our elected representatives have capitulated to big-money interests and disguised the bombshells behind eye-glazing boilerplate.

from simon johnson: Does Meaningful Financial Reform Have Any Chance? - The lobbyists did their job a long time ago. Treasury sent up a weak set of proposals – Secretary Geithner apparently felt that to do otherwise would be just to seek “punishment” for past wrongdoings; there is too little concern at the top levels of this administration regarding what comes next. And Senator Dodd was pushed hard by various interests to weaken all potentially sensible proposals – including anything that would bring greater transparency and safety to the derivatives market.

What would Goldman Lobbyists Hate About the Financial Reform Bill? by Mike Konczal - I actually read this bill as if I was a Goldman Sachs lobbyist, looking for all the sections that I hated and made a list of what items I needed to lobby hard on to kill or modify. My final verdict, by the time I got to the end? If I was a Goldman lobbyist, I’d probably shrug and go “eh, pass it.”What’s there to object to? More practically, what’s this bill really going to do? Let’s go through some specifics, from the point of view of a Goldman lobbyist: (continue reading)

from Konczal again: Lobbyists Cleaning House, CFPA, FSOC composition - I’ll probably alternate between snarky and serious financial reform blogging to keep myself sane. And right now I’m trying to think of a good metaphor to watch next week’s lobbying and amendment efforts during the markup of Dodd financial reform bill. There’s going to be a massive lobbying effort, and since there’s little that is really worrisome in the bill that has to go, the lobbyists can go after everything they want, and I’m sure whoever will be that 60th vote will give it to them.

and there’s also an interesting benefit for our alleged benefactor: Is there an alternative to exchange-traded CDS? - It’s pretty obvious that the exchanges, especially the big ones like the CME Group, would love to see everything consolidated with them. And they’re in luck: that’s exactly what we see in the Dodd bill. I’m sure that makes for happy pillow talk in the Dodd household: Dodd’s wife, Jackie Clegg, is a director of the CME, which paid her $153,219 in 2009; she also owns shares in the company worth about $235,000.

the review of the week ending Mar 20th has been completed & posted on the globalglassonion blog...it briefly summarizes and links to articles from MSM and the blogosphere, generally on the topics listed below and whatever else...

Wednesday, March 17, 2010

you’d have to have been living in a cave to have not heard by now one of the many rants that we’re on a way to a weimar republic style hyperinflation because of excessive stimulatory “money printing” by the Fed; to oversimplify, this idea comes from a school of economic thought called monetarism…below, John Mauldin points out that velocity must also be considered…

This week we do some review on a very important topic, the velocity of money. If we don’t understand the basics, it is hard to make sense of the hash that our world economy is in, much less understand where we are headed.

The Velocity of Money

The Federal Reserve and central banks in general are running a grand experiment on the economic body, without the benefit of anesthesia. They are testing the theories of Irving Fisher (representing the classical economists), John Keynes (the Keynesian school) Ludwig von Mises (the Austrian school), and Milton Friedman (the monetarist school). For the most part, the central banks are Keynesian, with a dollop of monetarist thrown in here and there.

Over the next few years, we will get to see who is right about debt and stimulus, the velocity of money, and other arcane topics, as we come to the End Game of the Debt Super Cycle, the decades-long cycle during which debt has grown. I have very smart friends who argue that the cycle is nowhere near an end, as governments are clearly increasing debt. My rejoinder is that it is nearing an end, and we need to think hard about what that end will look like. It will not be pretty for a period of time. The chart below shows the growth in debt, both public and private.

But the end of this debt cycle involves more than just debt reduction. There are a number of ideas we have to get our heads around, including the velocity of money. Basically, when we talk about the velocity of money, we are speaking of the average frequency with which a unit of money is spent. To give you a very rough understanding, let’s assume a very small economy of just you and me, which has a money supply of $100. I have the $100 and spend it to buy $100 of flowers from you. You in turn spend $100 to buy books from me. We have created $200 of our “gross domestic product” from a money supply of just $100. If we do that transaction every month, we will have $2400 of annual “GDP” from our $100 monetary base.

So, what that means is that gross domestic product is a function of not just the money supply but how fast that money moves through the economy. Stated as an equation, it is P=MV, where P is the nominal gross domestic product (not inflation-adjusted here), M is the money supply, and V is the velocity of money. You can solve for V by dividing P by M. By the way, this is known as an identity equation. It is true at all times and all places, whether in Greece or the US.

Our Little Island World

Now, let’s complicate our illustration a bit, but not too much at first. This is very basic, and for those of you who will complain that I am being too simple, wait a few pages, please.

Let’s assume an island economy with 10 businesses and a money supply of $1,000,000. If each business does approximately $100,000 of business a quarter, then the gross domestic product for the island is $4,000,000 (4 times the $1,000,000 quarterly production). The velocity of money in that economy is 4.

But what if our businesses get more productive? We introduce all sorts of interesting financial instruments, banking, new production capacity, computers, etc., and now everyone is doing $100,000 per month. Now our GDP is $12,000,000 and the velocity of money is 12. But we have not increased the money supply. Again, we assume that all businesses are static. They buy and sell the same amount every month. There are no winners and losers yet.

Monday, March 15, 2010

if you're having trouble following what has been happening with consumer protection, or more specifically, what was to be the Consumer Financial Protection Agency, i wouldnt be surprised, because even though ive read & linked to dozens of posts and articles on its progression, sorting it out has been difficult even for me…the CFPA was originally proposed by elizabeth warren in 2007 and advanced by obama as part of his financial reform package…the idea was to get all consumer protection into one agency with muscle, and prevent agency shopping among those being regulated…

this is a clickable picture of the present regulatory infrastructure for consumer protection.

since the beginning of this month, the planned agency has been in play in the Senate Banking Committee under Chris Dodd…it didnt take long for the original plan to be compromised, first with a proposal to put a watered down version under control of the Treasury, then to put it into a back office at the Fed: as Yves Smith put it: “Banksters Win Yet Again: Dodd Proposes Putting Consumer Protection Agency at the Fed - I felt certain when I read the Financial Times headline, “Proposal sees consumer watchdog role for Fed,” that I must have woken up in a bizarre parallel universe (but that is probably unfair to pretty much all universes parallel to ours: I imagine it would be very difficult to have one more perverse than ours). But no, sadly, this headline is for real; the only possible good news in this account is that this dreadful idea is far from a done deal. Putting the proposed consumer financial services watchdog in any existing agency, save perhaps the FDIC, no matter what the professed logic is, is really a plan to neuter it. The Treasury, Fed, and Office of the Comptroller of the Currency are notoriously bank friendly. Think they are gonna do anything to seriously inconvenience their charges? Not on your life.”

it was about this time that former presidents got together and paid a nighttime visit to president obama, to lobby him to step in and push for the original proposal:

its not exactly clear what caused Dodd’s epiphany over the weekend, maybe he had enough compromise, or maybe he was feeling the heat from other Democrats, or from columnists & bloggers, but he’s now pledged to start financial reform over, without the exemptions for those special interests:

The consumer financial protection agency would be part of the Federal Reserve.

Creates a systemic risk council that would be headed by the Treasury Secretary and would include "representatives of the Fed, the new consumer agency, the F.D.I.C., the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Housing Finance Agency — along with an official appointed to monitor the insurance industry, which is largely regulated by the states."

Regulate over-the-counter derivatives: "Standardized swaps and derivatives would have to be traded on exchanges or clearinghouses."

The Federal Reserve would regulate bank holding companies with $50 billion or more in assets, and "systemically important nonbank financial institutions".

btw, lest you get your hopes up for any real reform, this was the same senator Dodd, 4 months ago, in the WSJ:“Over the last number of years when [the Fed] took on consumer-protection responsibility and regulation of bank holding companies, it was an abysmal failure," Mr. Dodd, a Connecticut Democrat, said at a press conference flanked by eight other Democrats on his panel.

Sunday, March 14, 2010

As much as I'm not a big fan of the ACLU because of their penchant for deciding which of our civil rights that they will defend and which they won't, this is one that I think that I can agree with them on.

ID Card for Workers Is at Center of Immigration Plan

By LAURA MECKLER [Wall Street Journal]

Lawmakers working to craft a new comprehensive immigration bill have settled on a way to prevent employers from hiring illegal immigrants: a national biometric identification card all American workers would eventually be required to obtain." Under the potentially controversial plan still taking shape in the Senate, all legal U.S. workers, including citizens and immigrants, would be issued an ID card with embedded information, such as fingerprints, to tie the card to the worker.

========================

The biggest objections to the biometric cards may come from privacy advocates, who fear they would become de facto national ID cards that enable the government to track citizens.

"It is fundamentally a massive invasion of people's privacy," said Chris Calabrese, legislative counsel for the American Civil Liberties Union. "We're not only talking about fingerprinting every American, treating ordinary Americans like criminals in order to work. We're also talking about a card that would quickly spread from work to voting to travel to pretty much every aspect of American life that requires identification."

=========================

A person familiar with the legislative planning said the biometric data would likely be either fingerprints or a scan of the veins in the top of the hand. It would be required of all workers, including teenagers, but would be phased in, with current workers needing to obtain the card only when they next changed jobs, the person said. The card requirement also would be phased in among employers, beginning with industries that typically rely on illegal-immigrant labor. The U.S. Chamber of Commerce doesn't have a position on the proposal, but it is concerned that employers would find it expensive and complicated to properly check the biometrics.

Saturday, March 13, 2010

the review of the week ending Mar 13th has been completed & posted on the globalglassonion blog...it briefly summarizes and links to articles from MSM and the blogosphere, generally on the topics listed below and whatever else...

Friday, March 12, 2010

The Senate on Wednesday approved a wide-ranging bill that would push back the deadline to file for extended unemployment insurance until year-end and extends dozens of expired tax breaks.
The bill, passed by a 62-36 vote, is the latest job creation effort to go before lawmakers, though it contains virtually no new initiatives to boost employment. Its price tag has wavered between $140 billion and $150 billion, which is partially offset. Its next stop is the House, where a quick passage is anything but assured...

...after many speeches, officials have enacted little to help the nearly 15 million looking for work.

In this bill:

The bill passed Wednesday would push back the deadline to file for extended jobless benefits and the federal subsidy for COBRA health insurance until Dec. 31.
The measure would also extend dozens of tax provisions -- including allowing teachers to deduct education expenses and providing businesses a research and development credit -- that expired at the end of last year.

It would also temporarily halt a 21% reduction in Medicare physician reimbursement rates. And it would send another $25 billion to the states to help them fund their Medicaid programs for another six months.

The bill also extends two Recovery Act provisions for small businesses. It provides $354 million to continue funding the increased Small Business Administration guarantee and fee waiver through year's end.

Tuesday, March 9, 2010

last week i had a few links to articles about the Make Markets Be Markets conference on financial reform at the Roosevelt Institute on my other blog, & they pretty much flew under the radar; so im excerpting this one from rolfe winkler at reuters as an intro here…

Not till they’ve nothing left to lose? - Those calling for financial reform aren’t being upfront about its costs. This was again evident at the Roosevelt Institute’s otherwise very good conference at Time Warner Center yesterday. The purpose of the gathering was to galvanize support for deeper reforms than lawmakers have proposed. Roosevelt’s Chief Economist Rob Johnson and his murderer’s row of thinkers — including Simon Johnson, Elizabeth Warren, Frank Partnoy, Rick Carnell, Josh Rosner and others — presented a very good white paper outlining how best to clean up the financial system. Other attendees were George Soros, Brooksley Born, Jim Chanos, Joe Stiglitz. Even Eliot Spitzer showed up. When it comes to reform, they all argued, nibbling around the edges ain’t gonna cut it. Instituting any of them means less lending. A lot less lending. It means a deep and prolonged recession. Crucially, it means much higher unemployment.

In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000. China's per capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan. In other words, the average Chinese megacity dweller will be living twice as well as the average Frenchman when China goes from a poor country in 2000 to a superrich country in 2040. Although it will not have overtaken the United States in per capita wealth, according to my forecasts, China's share of global GDP -- 40 percent -- will dwarf that of the United States (14 percent) and the European Union (5 percent) 30 years from now. This is what economic hegemony will look like…

how does this happen? & why does china so quickly develop an economy more than 2 1/2 times that of ours? in End Of Influence by Brad Delong and Stephen Cohen, we can start to get an idea why we are in decline while china is in ascendancy…

United States is losing the money. America is now massively in debt to foreigners and will be more in debt with each passing year as far into the future as forecasters can see. It will not be squeezed as debt squeezed Britain, but it will be constrained. But it's China that is the biggest holder of U.S. obligations, with some $2.5 trillion in "reserves," the lion's share of it in U.S. debt obligations. America owes unimaginably large amounts of money to lenders (such as China), about $20,000 per American household, three-fourths of China's GDP, a fact worth repeating, a fact that makes rapid repayment impossible. (continue reading End of Influence)

because of distortions caused by currency exchange rates, today’s typically used nominal GDP comparisons between countries are relatively meaningless; for a better measure, purchasing power parity is used; & according to the latest figures the US is at $14.25 trillion and the chinese is at $8.77 trillion…but even by that comparison, the official chinese GDP doesnt include barter elements of their rural economy below the radar of the statisticians , while our GDP is inflated by parasitic activities with no socially redeeming value, such as the casino on wall street, zero-sum financial sector manipulation, zero-sum litigation, tax avoidance schemes & related accounting, etc;…its hard to determine what percentage of our GDP is really “productive”, and what part of just represents legalized manipulation or theft…but we do know that in real measures, china's industrial output already matches that of the US, and that they have passed the US in new car purchases this year…china also has more internet users, twice as many cell phone users, produces almost ten times as much steel, and its educational system generates more college graduates with science and engineering degrees than ours….china has a virtual monopoly on production of so-called rare earth elements, vital for hybrid cars, most green energy technologies and advanced military hardware, and has restricted their export…its also the world's largest property investment market, & there’s even more about china that you probably dont know…

a recent article about chinese investment in australia gives us a clue about how theyre consuming the worlds resources: Mount Whaleback was once 1,500 feet high. Today it's a hole, the biggest open-pit iron ore mine in the world -- an entire mountain crushed, sold and shipped to China. Ton by ton, including more than 300 million tons of ore per year and vast quantities of liquid natural gas, China is buying Australia. One of the world's most staggeringly huge transfers of natural resources has both enriched and alarmed Australia, and illustrated both China's savvy and ungainliness as it aggressively expands its influence around the world…

…….

a month ago, dani rodrik at project syndicate asked Will China Rule the World?, in reviewing When China Rules the World, by British scholar and journalist Martin Jacques… Jacques is unequivocal: if you think China will be integrated smoothly into a liberal, capitalist, and democratic world system, Jacques argues, you are in for a big surprise. Not only is China the next economic superpower, but the world order that it will construct will look very different from what we have had under American leadership.

Americans and Europeans blithely assume that China will become more like them as its economy develops and its population gets richer. This is a mirage, Jacques says. The Chinese and their government are wedded to a different conception of society and polity: community-based rather than individualist, state-centric rather than liberal, authoritarian rather than democratic. China has 2,000 years of history as a distinct civilization from which to draw strength. It will not simply fold under Western values and institutions.

A world order centered on China will reflect Chinese values rather than Western ones, Jacques argues. Beijing will overshadow New York, the renminbi will replace the dollar, Mandarin will take over from English, and schoolchildren around the world will learn about Zheng He’s voyages of discovery along the Eastern coast of Africa rather than about Vasco de Gama or Christopher Columbus.

Gone will be the evangelism of markets and democracy. China is much less likely to interfere in the internal affairs of sovereign states. But, in return, it will demand that smaller, less powerful states explicitly recognize China’s primacy (just as in the tributary systems of old).

while i doubt americans would ever tolerate paying tribute to another sovereign, we are going to have to make the decision whether we want to be part of china’s world, or a rogue state at war with the rest of the world…as you can see, china will increasingly have control of the dwindling resources we will need to even continue our current standard of living, let alone progress…

Saturday, March 6, 2010

the review of the week ending Mar 6th has been completed & posted on the globalglassonion blog...it briefly summarizes and links to articles from MSM and the blogosphere, generally on the topics listed below and whatever else...

Wednesday, March 3, 2010

For the big have gotten even bigger since the start of the financial crisis. At the end of 2007, the Big Four banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — held 32 percent of all deposits in FDIC-insured institutions. As of June 30th, it was 39 percent.

But Simon Johnson gives an even broader perspective on how big the too big to fails have gotten:

Fifteen years ago, the combined assets of our six biggest banks totaled 17 percent of our GDP. By 2006, that number was 55 percent. Right now, it stands at 63 percent.

Johnson also points out that:

The big four have half of the market for mortgages and two-thirds of the market for credit cards. Five banks have over 95 percent of the market for over-the-counter derivatives. Three U.S. banks have over 40 percent of the global market for stock underwriting.

As I’ve previously noted, the government created the mega-giants (they are not the product of free market competition), and their very size destroys the real economy like a massive black hole destroys the matter around it.

And as Johnson and many others have pointed out, the very size of the giant banks enables them to easily capture politicians … about as easily as theGreat Attractor captures galaxies.

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....